Which of the Following Internal Control Activities Will Most Likely

question 90

Multiple Choice

Which of the following internal control activities will most likely prevent the concealment of a cash shortage by improperly writing off a trade account receivable?

• A)Write-offs must be approved by a responsible officer after review of credit department recommendations and supporting evidence.
• B)Write-offs must be supported by an aging schedule showing that only receivables overdue several months have been written off.
• C)Write-offs must be approved by the cashier who is in a position to know if the receivables have, in fact, been collected.
• D)Write-offs must be authorized by company field sales employees who are in a position to determine the financial standing of the customers.

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Definitions:

Herfindahl Index

A measure of market concentration that is calculated by squaring the market share of each firm competing in a market and then summing the resulting numbers.

Economic Concentration

The degree to which a small number of firms occupy a large proportion of the market in a particular industry.

Market Shares

The portion of a market controlled by a particular company or product.

Horizontal Merger

A business consolidation that occurs between firms that operate in the same industry.